Investment banks need to rethink profit strategies

Boston Consulting Group says investment banks' return-on-equity could fall to 5% and that the best way to save costs is to reduce salaries, benefits and bonuses.

Boston Consulting Group BCG forecasts that return-on-equity in the investment banking industry could fall to as low as 5% and says overall compensation structures need to be rethought as part of a cost reduction.

In a report issued on Wednesday, BCG highlights the now well-documented constraints within which investment banks are operating a weakening business outlook strict regulations high capital costs and reduced leverage. The Massachusetts-based consulting firm goes on to question whether investment banks can emerge from the crisis...